Is all about chair yellen. Tom with lunch yesterday, you would not have known it, that there was a dovish tone, but i will tell you, the markets moved more than i thought after the nonevent. Really the questions got a response. The harvard will join us dean harvard will join us. Francine i think you put a perfect. When you look at market movements, there is more investors saying she is chasing the markets, not a good place to be. This is one of our main discussion points. Lets get to the first word news. Vonnie thank you. The airport in brussels will remain closed to passenger flights again. It has been out of operations since the terrorist attack. Once the airport doors reopen, arriving passengers will be sent to the hangers to collect their bags. The departure holds will only be able to have 1 5 of normal passengers. The Un Security Council is being pushed to fight back against iran Fourth Nuclear missile tests. The stabilizing and provocative; they say they launched the missiles in defiance of the u. N. Resolution. First democratically elected leader in a half century has been sworn in. She took the oath of office and officially begins the term friday. Hes a close ally of a nobel prize winner, who was barred from becoming president , and was officially named foreign minister, who says she will lead the government. Republican president ial candidates are backing off the support of the partys nominee. Trump says he doesnt feel the l beholden because he has been treated badly. Callingident obama is for aggressive steps to curb an epidemic of painkiller and heroin abuse that kill thousands each year. He spoke at a conference in atlanta; is administration has issued guidelines that would make treatment available for millions of people. 47,000, americans died of drug overdose. For the first time in days, lets go through our data check carefully. Equities, bonds, currencies, commodities they continue to move this morning, equities up and further up this morning. We will get to the vickx in a moment. A twoyear. 77 we will have a chart on that in a bit. Oil up, dollar down. 13. 82 is remarkable. Renminbi an enormous moves down. German twoyear showing the challenges. Francine, how do you interpret this . Iine enormous moves saw that on basic resources. Resources its all about janet yellen, and watch for yourdollar. I dont know whether that puts more pressure on mario draghi to do more at this level. We have the expert on this; we will ask him. Tom we will get to him in a moment. Lets look at one of the stories i cant say this enough. Everyone i talk to circles back to china. China, china, china. May be china, china, yellen. The chinese appreciation here is the new weakness, with the devaluation here and the managed dynamics of this trend. We rolled over with the new renminbi strength. Tomvonnie its fascinating; the was a story pointing out today that the synthetic index that measures the chinese yuan is actually weakening, down 5 this year. Theyre managing versus the u. S. Dollar. Tom steve roach do that. Did you ever think sunday your be talking about the synthetic . Knew ikn knew, i just tom francine, give us the synthetic chart please. Francine as long as the chinese authorities nowkknow, thats fie with me. Its all about china. Yellen, and might also have something to do with japan. But basically, i chose japans topix. I benchmarks it to the tobacco index. Youis chart tells you can see its at a record for the year. That means the topix they go down. The like that, tom . Tom its brilliant. The handkerchief is coming out. Tom he cant speak you so taken s so francine lets bring in our guest, the global head of fx strategy. Great to have you on the program. Good morning. Surprisedsense you that janet yellen put the eyes on the dots . She wanted to make it a definitive guide to investors who cant rate hike the markets moved within two seconds. Were not surprised. And ill tell you why. We think the markets are ahead of themselves in pricing in u. S. Fed rate hikes. We think a rate hike is out of the cards. Its a cold call, the we have had it for most of this year. There were two key things that janet yellen said, or didnt say. Firstly, she signaled she is in no rush to hike. And mrs. After the rate tightening cycle has already begun. Also she is talking about the risks, and particularly the risks in global markets. This is a key factor. To bring all this together, our view is we still think the dollar is overvalued, particularly against major currencies. Our view is that yourdollar will move higher. Argue for the quarter is 114. We think it goes to 116 in the summer. We areat perspective, not surprised, and we think Janet Yellen Francine core inflation is not bad. Employment is not bad either. Will drive employment to 4 . Good point. We would argue that u. S. Domestic conditions are consistent with a rate hike, but it is global concerns, and i think fear from metro markets, particularly the credit markets, that we think is going to prevent the fed from being able to hike rates. Tom this is such an outlier call you have going lets bring up the index, a blend of our old trading partners, very eurocentric. Pants, dxy is oppressive of dollar is the precipice of dollar weakness. Why wei want to know the are focused on china. In the last 48 hours, everyone i speak to makes clear that china is the card here. What do you look for from the Chinese Government as greater Economic Conditions . Its a good point, and i think china is important here. Particularly to get back to these risks that janet yellen is focused on. We would argue that it was certainly equity market turmoil in china that kicks things off last summer, i continued into this year. But the big picture is growth. Whats happening to chinese growth . Will chinese growth drag down overall Global Growth . This is going to be a big point for janet yellen and the fed, and ultimately, it will have a big influence on whether or not shes able to reengage and to continue. Tom we are going to go to china in the next section, and we will focus much more on the macroeconomics of the nation. When i look at what chair yellen said yesterday, it seemed to be so original and so outside the text books. There was a brilliant question on reaction functions, the presumption of a model. Does the fed have a model right now, or are they making it up as they go along . I would say the fed has many models to look at the u. S. Domestic economy. From that perspective, things are looking pretty good. As we just highlighted, we think ripe for a are rate hike, of Global Conditions are trickier. This is where they struggle to have models, because we dont know what the impact from china is going to be. We dont do what the credit market or equity market is going to be on the u. S. Economy. We think janet yellen is right to focus on these global factors. Tom to begin this morning with clearly anwell, outlier. In our next hour, we will continue on International Relations. The state of the United States. We will get the perspective of richard hoss into the president ial derby across america. From london, from new york, bloomberg surveillance. Francine you are watching surveillance. Lets get straight to the Bloomberg Business flash with vonnie quinn. Vonnie thank you. Downa deal that brings the main assembler of iphones with the maker of japans First Television set. Foxconn was able to negotiate a controlling stake in sharp, 3. 5 billion. Foxconn has been trying to buy this companies and 2012. Estimateser takata that the biggest recall ever may cost as much as 24 billion, according to a person familiar with the matter. The worst Case Scenario would involve 288 million airbag inflators. Theyre still trying to figure out how the cost will be shared. And job cuts are on the way at boeing. They plan to eliminate 4000 jobs after commercial airplane division. 1600 workers have elected to leave under a voluntary program; the rest involve attrition and vacancies. Thats the latest Bloomberg Business flash. Much. Ne thank you so chinas Banking Sector is under pressure. Icbc cut its dividend payout ratio for 2015. The Profit Growth is stalling in light of rising bad loans; net income beat estimates. For the very latest, we are joined by enda in hong kong. Give us a sense of how bad these bad loans are. Enda good morning, francine. I think thats the story right now when you step back, it is quite bearish against the backdrop of the slowing economy bad loans are at a 10 year high, the government had to roll out a debt for equity stock, which is not particularly popular. They dont want to talk bad debt for bad equity. Its something of a concern for investors, and i dont think its just the top for banks. In the rural areas, the regional lenders who are funding the the zombies, thats the bad debt. As long as there are bad debts on balance sheets, there wont be lending. Tom and i can report to you that there is a shift in dialogue in new york. People are really focused on china. I havent seen that in ages. Its the same shift in analysis going on in hong kong. A new urgency about the macroeconomic link into the financial system. Enda i think very much so. Fears ise new modern the spillover effects from china. Yellen talking about the global risks; specifically, thats capital outflow, thats what china will do with its exchange rates, and how that will impact the rest of the world. The interconnectedness is a major concern for investors from hong kong to new york. Francine and quickly, i have been trying to figure out these capital ratios. Is at the same . Are they comparable . Or is it very difficult to see . Enda well, look, there are always question marks around transparency, the same with the economic data. There is always a degree of skepticism, and most of that is warranted. Few analysts agree with the but wel npl ratio, arent yet talking about a crisis stage for chinas banks; at least not the big four. Not like 1999 or 2004 when the government had to intervene, but there is a concern that its worse than whats being reported. Francine enda curran. Stephen, when you look at china, i know you werent surprised by what chair yellen said, but it was clear she was mentioning china. Saying we need to make sure foreign economies stabilize. This is her talking about china. Tom talks about the fact that it is now coming to the perception of investors in the u. S. Based on the turmoil in january, we saw all the concern about outflows. Is at stabilizing . I think it is. The. 2 would make is that the chinese economy is transitioning tha from one focusing on manufacturing output to one that is Service Sector. Yes, it is stabilizing, but the amount of that or how much stabilization there is is unknown. The first important thing is what is the impact on the u. S. Economy. Second, what does it mean . Or commodity exporters the point we would make is that if chinas transition to a service victor driven economy a Service Sector driven economy, thats good for china, but not for exporters. Another thing we would have here , in addition to the risk for the dollar,s weakness and commodity exporters, and we think australian dollar, canadian dollar, brazilian real, will come under pressure. Tom i have to rip up the script. Does that mean oil lower . In the shortterm, it could. Our view, in the view of our commodity team, is that this recover weve had may have been overstated, maybe ahead of fundamentals. When you look ahead at Something Like iron ore which has seen a dramatic, recovery, if there is not a demand tom good point. I want to emphasize the focus on global demand, global slowdown. Pimco was brilliant yesterday, moving to 2. 0 on his global gdp. In the next hour, how all of it dovetails into the agitation in the volatility in the market. Looking forward to the new interview. Stay with us. Bloomberg surveillance. Francine these are pictures of isnt that pretty . We have to talk about brings it. About brings it. Brexit. Theres an interesting read about how all their polls are wrong. We picked out some inc. For the morning must read picked out something for the morning must read. He talks about janet yellen, and her remarks. He goes on to list one of them, being that politicians arent taking advantage of the fed giving them a little bit of the lunch. Our guest is still with us. You are one of the only ones calling for a lower dollar. Others were talking about divergent. What does it mean for mario draghi . It probably puts more pressure on mario draghi to do more. Euro will probably rally. But remember, the ecb looks at the euro on a trade weighted basis, and the biggest component now is renminbi. Business changing things away from just focusing on eurodollar. The point i would highlight is that you have a broader measure. The only problem with that, however, is that in his most recent press conference, he gave us an indication that the ecb could be done on deposit rates. It puts more pressure on qe, and asset purchases. But i think that is less effective in driving the currency lower. It may mean it is pretty tough for mario draghi to do anything. Tom thats why i watch him up surveillance. E lets go to that chart. We call this the lollipop chart. This is the fed meetings, and the clear trend toward a higher twoyear u. S. Yield. We came over here little bit. Andome over a little bit, how important is the monitoring of the markets the feds . Piece is truly must read are the markets telling cherry hill and what to do . I dont think so. I think janet yellen selling the markets what to do. I think that chart you just focused on is super important; the u. S. Twoyear yield check it. That gives us an idea in terms of what the market is pricing in. I think it is still too high. The fact that u. S. Twoyear yields have come lower on the back of what she had to say is probably the correct, but we would argue it has more to do with the downside, and the fed is unable to hike Interest Rates. Francine thank you so much. We will be talking about oil and the Resurgent Oil industry going after market share of the worlds producers, when they meet next month. Oneext, we will hear from of the worlds foremost experts on the iranian oil on the future of the Islamic Republic energy sector. A lot of these stocks and europe are rallying on the back of the comments by janet yellen yesterday. Tom good morning. The fallout after the janet yellen speech. Francine lacqua in london; tom keene in new york. Lets look at the data. Real movement in the market over the last 18 hours, the vix plunges, good equity markets, futures continuing higher this morning. Dollar weaker, yen stronger, the german twoyear churning at. 4 9. Lets get to the first word. Vonnie thank you. A major blow for brazils president , Dilma Rousseff. She faces an Impeachment Vote in congress. It has left her ruling coalition. There is speculation that other parties may follow. In venezuela, the Opposition Controls Congress and is deepening the standoff with the president. Lawmakers approved an amnesty law aimed at freezing dozens of politicians and activists. He vowed to block it. The opposition has had several key decisions overturned by venezuelas supreme court. A message for David Cameron, saying that he wants the u. K. To stay in the european union. The panel challenged cameron to present a positive vision of the eu. Theapproach make case that it would be good for people of all income brackets. Greece is poised to take in the terrorist that turkey is losing. They expect the number to rise to a record number. Turkey says that the arrival rose 10 , and russia has bad tour operators in a pursuit over the syrian civil war. Finally, donald trump is strongly defending his Campaign Manager in an incident involving a reporter. Police say he yanked the arm of a female reporter as she tried to question him. Trump says he is innocent, should never have been charged, and has no plans to fire global news, 24 hours a day. Im vonnie quinn. Francine thank you so much. Lets talk oil. Business called a doctor the 158 billion barrel woman. She joins us now. Doctor, thank you for joining us. Iran will attend these talks members,ow opec but they say they dont want to read production because they are just coming on board. Exactly. Oil,been trying to produce and now that removals of sanctions, they want to make sure they will get back to the market before they will commit themselves to cut any surplus in the market, if they would have ever done. Francine we recently spoke theyre chasing these lucrative arabian contracts. When you think we will start seeing significant contracts given to foreigners . Look, the reality is that there is an opportunity for complications. As of now, we dont know the exact terms of offers. But im sure they are very well aware of the fact that there is a high enthusiasm in the market and Oil Companies want to know whats on the table, for them to get involved. Time thinking about a around the end of june or july for the first round to be held in iran, were almost 30 oil and gas bills will be put on offer. Ill explain why that has to be the case later. Tom doctor, when i look at the microeconomics of oil, we know about supply and demand, that it is still a relatively tight market versus other oil collapses we have seen. Which country is the Tipping Point for you . We saw saudi kuwait yesterday, the discussion of iran. Which country are you focused on to be the determinant of where prices will move . Definitely iran will impact the international market, and will impact the volume of oil available, and also it would impact the oil prices. Iran, i would say, is at the top of the list, and also ir aq. It would be the third country that could, at a very high level, impact the oil market flow in the prices. Tom within that, if they marginally move, will be the response of saudi arabia . Look, with regard to saudi arabia, i think they really need to get back to the longstanding principle of consensus within opec. The reality of saudi arabia taking their natural decisions, hoping that they could control the market share, which clearly proves theyiled, need to get back to making decisions on ansy consensus. If you look at the history of decisions taken under the umbrella, its when the big boys iran and saudi arabia g